Karnataka High Court
Godolphine India Private Limited vs Um Projects Llp on 1 April, 2022
Bench: Chief Justice, S R.Krishna Kumar
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 1ST DAY OF APRIL, 2022
PRESENT
THE HON'BLE MR. RITU RAJ AWASTHI, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR
COMMERCIAL APPEAL NO. 140 OF 2022
BETWEEN:
GODOLPHINE INDIA PRIVATE LIMITED
(FORMERLY KNOWN AS DARVESH
INDUSTRIES INDIA PRIVATE LIMITED)
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED
OFFICE AT SURVEY NO. 1256 AND 1261
RAJPUR ZULASAN ROAD
RAJPUR TALUKA KADI MAHESANA
GUJARAT - 382 715.
HAVING ITS REGIONAL OFFICE AT
SUITE NO.1011
FIRST FLOOR
PRESTIGE DEJA VU TOWERS
PROMENADE ROAD, FRAZER TOWN
BANGALORE - 560 005
REPRESENTED BY ITS DIRECTOR
SRI ABDUL RASHEED
... APPELLANT
(BY SMT. IRFANA NAZEER ADVOCATE)
AND:
UM PROJECTS LLP
A LIMITED LIABILITY PARTNERSHIP
INCORPORATED UNDER THE LIMITED
LIABILITY PARTNERSHIP ACT, 2008
HAVING ITS REGISTERED
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OFFICE AT NO.39, UNITED MANSIONS
FIRST FLOOR, MG ROAD
BANGALORE - 560 001.
REPRESENTED BY ITS DESIGNATED PARTNER
SRI P.S. KIRAN KUMAR
... RESPONDENT
(BY SRI VIKAS MAHENDRA FOR SMT.ANUPAMA HEBBAR,
ADVOCATE)
---
THIS COMMERCIAL APPEAL IS FILED UNDER
SECTION 37(1)(b) OF THE ARBITRATION AND
CONCILIATION ACT READ WITH RULE 4 OF THE HIGH
COURT OF KARNATAKA ARBITRATION (PROCEEDINGS
BEFORE THE COURTS) RULES 2001 READ WITH SECTION
13(1) OF THE COMMERCIAL COURTS, COMMERCIAL
DIVISION AND COMMERCIAL APPELLATE DIVISION OF
HIGH COURTS ACT, 2015 PRAYING TO CALL FOR RECORDS
IN COMM.A.A.NO. 247/2021, ON THE FILE OF THE COURT
OF THE LXXXIII ADDL. CITY CIVIL AND SESSIONS JUDGE
AT BENGALURU (CCH 84) AND ETC.
THIS APPEAL COMING ON FOR ADMISSION THIS DAY,
S.R.KRISHNA KUMAR J. DELIVERED THE FOLLOWING:
JUDGMENT
This appeal by the respondent in Com.A.A.No.247/2021 is directed against the impugned order dated 04.03.2022 passed by LXXXIII Additional City Civil and Sessions Judge, Bengaluru (Commercial Court) whereby, the Commercial Court partly allowed the application filed by the respondent herein under Section 9 of the Arbitration and Conciliation Act, 1996 (for short 'the said Act of 1996') and dismissed the interlocutory -3- application-I.A.No.III filed by the appellant under Section 9 of the said Act of 1996.
2. The material on record discloses that the respondent entered into a lease deed dated 10.06.2020 with the appellant in relation to the schedule premises. The appellant had filed A.A.No.127/2021 under Section 9 of the said Act of 1996 for an interim order / direction restraining the respondent from interfering with the appellant's possession of the schedule property pending disposal of the Arbitration proceedings, which are said to have been initiated by the appellant. In the said A.A.No.127/2021, the appellant filed an application, I.A.No.1 for ad-interim order of temporary injunction restraining the respondent from interfering with the appellant's possession and enjoyment of the schedule property during the pendency of the arbitration application. In the said A.A.No.127/2021, the appellant also filed a memo stating that the appellant was ready to deposit the agreed rent on a monthly basis to the tune of 40% of the rent before the trial court.
3. The said A.A.No.127/2021 and the application, memo etc., filed by the appellant, having been opposed by the respondent, the trial court passed an order dated -4- 22.12.2021 restraining the respondent from interfering with the appellant's possession of the schedule property till the next date of hearing i.e,. 18.01.2022. In this context, it is relevant to state that the said interim order was not extended. Subsequently, under the said order dated 22.12.2021 passed in A.A.No.127/2021, the trial court permitted the appellant to deposit the rent as prayed for in the memo dated 21.12.2021.
4. Meanwhile, the respondent herein filed the instant COM.A.A.247/2021 before the trial court under Section 9 of the said Act of 1996 for a direction to the appellant herein to deposit outstanding rent and maintenance charges and for other reliefs. In the said proceedings, in addition to opposing the application filed by the respondent, the appellant also filed an application I.A.No.III under Section 9 of the said Act of 1996 to restrain the respondent from interfering with the appellant's possession of the schedule property till disposal of the arbitration proceedings. The said I.A.No.III having been opposed by the respondent, the trial court proceeded to pass the impugned common order allowing COM.A.A. No.247/2021 filed by the respondent and dismissing I.A.No.III filed by the appellant. Aggrieved by the impugned -5- common order, the appellant is before this Court by way of the present appeal.
5. A perusal of the impugned order passed by the trial court will indicate that the trial court has directed the appellant to pay the sums towards occupation of the leased premises, including the amount towards maintenance along with applicable GST at the rate mentioned in the lease deed dated 10.06.2020, from December 2021 till conclusion of arbitration proceedings or till passing of any interim order by the Arbitral Tribunal to be constituted, so long as the appellant herein continued to be in occupation of the schedule premises; under the impugned order, the Commercial Court also directed the appellant herein to adjust any amount, if already deposited in A.A.No.127/2021, in payment of the sums as per this order and the payment to be made by the appellant herein as per the impugned order, would be subject to final order to be passed in the arbitration proceedings; so also, I.A.No.III filed by the appellant was dismissed by the trial court. While doing so, the trial court held as under:-
"10. Admitted facts of the case are that applicant is owner of the property known as United Mansions in which built up area of 30,350 sq.ft was leased to the respondent with effect from 19/10/2019 and this lease deed contains different terms and conditions and also contains arbitration clause for resolution of the dispute in clause 25. It is an -6- admitted fact that lease deed is for a period of 25 years by agreeing to pay rent as mentioned in the lease deed. It is also an admitted fact that due to several reasons including COVID 19 pandemic, conditions mentioned in the lease deed including that of payment of rent are not properly followed. It is also an admitted fact that there are several differences between the applicant and respondent with regard to compliance of the terms and conditions of the lease deed and there are allegations against each other about breach of terms and conditions of the contract. Due to these differences several notices were also exchanged as mentioned in the application and admitted in the objection filed by the respondent. Finally both the parties have raised arbitration dispute and have exchanged the respective claims for resolution through arbitration. The admitted fact also show that both the parties have appointed their arbitrator and have not consented for the name suggested by the other party. It is also an admitted fact that the respondent has approached the Hon'ble High Court with CMP No.567/2021 which is said to be pending for appointment of Arbitrator. Therefore, dispute raised by the parties is to be resolved through arbitration as provided in clause 25 of the lease deed.
11. Now, present application is filed by the applicant landlord praying for an order of direction to the respondent to pay the maintenance charges along with applicable GST from March 2021 till October 2021 amounting to Rs.1,93,41,675/- Applicant also prayed to direct the respondent to pay sums towards occupation of the leased premises including maintenance along with the applicable GST at the rate said to be in the lease deed from October 2021. The respondent has objected the claim of the applicant in the present application and also contended that the prayer made in the present application is one of the claim that is proposed to be made before the Arbitral Tribunal to be constituted. In the objection filed by respondent, the respondent has referred to different claims that are sought to be placed by the applicant which includes payment of outstanding rent and GST and outstanding maintenance charges and interest thereon and also the vacant possession of the lease premises. The respondent contends that the claim of Rs.1,93,41,675/- sought to be made before the learned Arbitrator is prayed to be granted in the present application under Section 9 of the Arbitration & Conciliation Act which is not permissible. It is also contended by the respondent that applicant has violated the terms and conditions of the lease deed and is not maintaining the premises and has not properly responded even for restructure of the lease and the applicant is not entitle for the relief prayed. The respondent also contends that in the application filed in A.A.No.127/2021 the respondent had undertaken to deposit 40% of the rent in the court's registry till disposal of the arbitration proceedings and by considering the same the City Civil Court has granted an order of -7- temporary injunction, as such, present application is not maintainable. The respondent has even filed another application in I.A.NO.III seeking an order against interference in possession of the schedule property by the respondent.
12. As stated above, most of the facts of the case are admitted. According to the applicant from March 2021 the respondent has not made payment of rent and also maintenance charges, GST etc and this amount comes to Rs.1,93,41,675/-. However as rightly stated by the respondent this is one of the disputed amount which is sought to be claimed and resolved through arbitration. In the notice initiating arbitration this claim of arrears of rent is also included. Therefore, as rightly contended by the respondent as claim for Rs.1,93,41,675/- which is arrears of rent, maintenance charges etc upto October 2021, is one of the dispute that itself to be resolved through arbitration. Therefore under Section 9 of the Act, by an order of interim measure, direction to pay such amount cannot be passed as correctness of this claim is to be decided and responsibility of the respondent to pay this amount as outstanding balance as contended by the applicant and contention of the respondent about restructure of the lease and the difficulties faced as contended and lapses in maintenance of the premises as complained are all to be resolved in the arbitration proceedings to be initiated. Therefore this prayer for direction to the respondent to pay Rs.1,93,41,675/- would be a one of the final relief that could be passed in the arbitration proceedings and it requires adjudication and as such as an interim measure under Section 9 of the Act this relief cannot be granted.
13. Admittedly, respondent has filed A.A.No.127/2021 under Section 9 of the Act seeking an order against interference in respondent's possession of the schedule property. A copy of the order produced by the respondent show that on 22/12/2021, court has passed an order restraining the present applicant from interfering with the possession of schedule property by the present respondent. Therefore an order against interference in possession of the respondent is already passed in A.A.No.127/2021. Both the parties have not disputed that this A.A.NO.127/2021 is still pending. Since order against interference in respect of possession is already passed in A.A.NO.127/2021, the respondent cannot seek same relief again as prayed in I.A.NO.III. Therefore I.A.No.III is prima facie not maintainable in view of pendency of A.A.NO.127/2021, wherein similar relief is prayed as a final relief and an order is already obtained.
14. Apart from this, respondent is seeking this order by filing I.A.NO.III. As rightly contended by the learned counsel for the applicant interim order can be given in support of the main relief. The learned counsel for the -8- applicant has relied on the decision of Hon'ble Supreme Court reported in AIR 1952 SC 12 (The State of Orissa v. Madan Gopal Rungta) in which the Hon'ble Supreme Court has held that, "The interim relief can be granted only in aid of and as ancillary to the main relief which may be available to the party on final determination of his rights in a suit or proceeding." In another judgment reported in 2006 SCC Online Bombay 216 (Mahindra and Mahindra Limited v. Dwarkanath Babaji Dalvi and another)the Hon'ble High Court in para 26 has stated that, "the court/tribunal while granting interim relief, has also to keep in mind that the interim relief is always granted in the aid of final relief. If the final relief is not available to the person seeking interim relief, then no interim relief can be granted in his favour". This decision makes it very clear that the interim relief can be granted in aid of final relief. The final relief prayed in the present application under Section 9 is to direct the respondent to pay arrears of rent and also direction to pay the rent or the amount mentioned in the lease deed till disposal of arbitration proceedings. I.A.No.III filed by the respondent is for entirely different relief of injunction against interference in possession. So this relief prayed in I.A.No.III by the respondent is not a relief in aid of the final relief prayed in the application. Apart from this, Section 9 application itself is an application seeking an interim relief. In such application, by filing I.A.NO.III some other order which is not in aid of the final relief prayed in Section 9 can be sought by the other side. If the respondent is in need of such order, it can maintain independent application under Section
9. However, in the present application, respondent cannot seek a totally different relief, by filing interim application. There is also no scope for making any counter claim in the application under Section 9.
15. Looking from any angle the application in I.A.NO.III filed by the respondent seeking an order against interference is clearly not maintainable. Apart from this in view of pendency of A.A.No.127/2021, prima facie, present IA No.III is devoid of merits. Therefore, respondent is not entitle for the relief prayed in I.A.NO.III, which is also taken up along with main application.
16. Coming to the second relief prayed by the applicant, of directing the respondent to pay sums towards occupation of the leased premises including maintenance, along with applicable GST, at the rates set out in the lease deed from October 2021, respondent has contended that in A.A.NO.127/2021 it has filed a memo and undertaken to deposit 40% of the rent in the court's registry till disposal of arbitration proceedings and the relief prayed in present application cannot be granted. However, order sheet in A.A.NO.127/2021 produced by respondent show that, advocate for present respondent has filed a memo stating that it is ready to deposit agreed amount of monthly basis to -9- the tune of 40% of the amount due before the court. However, there is no order on this memo and present applicant has not made any submission on this memo. In the order sheet or memo, there is no any endorsement of the applicant accepting such offer. Therefore, present respondent filing memo in A.A.NO.127/2021 by agreeing to deposit 40% of the rent before the court will not take away the right of the applicant to seek payment of entire dues of rent as and when it fall due till the disposal of arbitration proceedings. Moreover, on this memo except noting about such memo filed, court has not passed any order in A.A.NO.127/2021. Even the respondent has not produced any document to show that as per the memo dated 21/12/2021 it has deposited 40% rent before the court. The applicant has stated that no such rent is paid or deposited by the respondent.
17. According to applicant, from March 2021 respondent has not paid rent. The documents produced by applicant show that recently respondent has sent an email on 8/1/2022 complaining that the cleanness of the common area is not taken care properly. This has been replied by the applicant stating that rent itself is not paid for the occupation of the premises and has reiterated its claim. These exchanged emails show that, respondent is not paying rent but is complaining about non maintenance of the common areas. It is well established principle that a tenant, so long as in occupation of the premises have to make payment of rent. Applicant is not running a charity to allow the respondent to continue and enjoy the premises freely and to complain about maintainance. Apart from this, dispute resolution clause of the lease deed itself in clause 25.4 provides as under:
"25.4. ...
During the pendency of the Arbitration, the parties shall continue to perform their respective obligations to the extent possible under this lease as long as the Lessee continues to occupy the Demised Premises."
18. Therefore, even during the pendency of arbitration proceedings, parties shall continue to perform their respective obligations to the extent possible under the lease deed, as long as the respondent continues to occupy the leased premises. It is not the case of the respondent that it has vacated the premises or it has handed over the premises. Though, termination notice was given by applicant, it is respondent's contention that this termination is illegal and respondent is continuing in occupation of the premises. The legality and correctness of the termination and the right of the respondent to continue in the premises etc are all to be decided in the arbitration proceedings. However, so long as respondent continue to be in occupation of the premises, as per clause 25.4 of the lease deed, respondent
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shall perform its obligation of making payment of rent and other charges. As such, only because arbitration has been initiated and that the termination notice has been given, respondent cannot avoid payment of sums as mentioned in the lease deed to the applicant either as rent or as compensation or as mesne profit, by whatever name it is called. Therefore, respondent cannot avoid payment of rent on the ground of initiation of arbitration proceedings so long as respondent continued to be in occupation of the premises. The contention of the parties about merits of their claim could be resolved through arbitration. Till then the respondent is to be directed to pay the monthly sums as mentioned in the lease deed, towards rent, maintenance charges and other charges till disposal of arbitration proceedings or till passing of any interim order by the Arbitral Tribunal to be constituted.
19. Applicant has claimed this relief of direction to the respondent to pay this amount from October 2021. In December 2021, respondent filed application in A.A.NO.127/2021 and in the same month applicant has also filed present application. Since order prayed is under Section9 of the Arbitration & Conciliation Act and order is not a final adjudication of the dispute between the parties and it is an order of an interim measure, respondent could be directed to pay sum towards occupation of the leased premises including maintenance, applicable GST at the rate set out in the lease deed from the date of application till disposal of the arbitration proceedings regularly, as and when it becomes due. The payments to be made by the respondent would be subject to final adjudication in the arbitration proceedings. Since the respondent had filed a memo in A.A.NO.127/2021 stating that it will deposit 40% of the rent in the court, if any rent is so deposited, same can be adjusted in the rent payable by the respondent to the applicant as per this order.
20. Learned counsel for the applicant has relied on a decision of Hon'ble Delhi High Court reported in 2008 SCC Online Delhi 1198 (Vijay Gupta v. Manoj Mehta) in which the Hon'ble Delhi High Court has held in parea 5 as under:
"The court cannot come to the rescue of a defaulting party and cannot grant an injunction in favour of a person who is encroaching upon the rights of the others and is acting contrary to the contract between the parties. The Court can help only those person who have a legal right against others and want the help of the court to enforce their rights."
21. In another decision reported in MANU/DE/2507/2021 (Cinepolis India Private Limited v. Sarita Multiplex Private Limited), in which similar point was involved, though under Section 37 of the
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Arbitration & Conciliation Act, in para 12 Hon'ble High Court has held as under:
" There is no constraint on Cinepolis to continue its occupation of the Multiplex. In fact, the Lease Deed enables it to exist from the lease, yet, it has not surrendered the possession of the leased premises. In effect, Cinepolis continues to willingly remain in the lease relationship and has also sought an injunctive order against termination of the Lease Deed. They contend that since a seizeable investment of nearly 10 crores has been in the property, it would be prudent to retain the premises. That is a commercial decision for them to take. But, as long as Cinepolis continues to be in occupation of the premises under the hope that necessary Fine NOC would follow, it is imperative that SMPL's interests should also be protected. Hence, the direction for deposit of the rent till adjudication of the claims by the arbitral tribunal is certainly fair and equitable."
22. For all these reasons, respondent can be directed to pay the rent towards occupation of the alleged premises including maintenance and applicant GST at the rate set out in the lease deed from the month of December 2021 till disposal of arbitration proceedings to the applicant, so long as the respondent continued to occupy the premises. This payment shall be subjected to final award that may be passed in the arbitration proceedings. Accordingly, the application under Section 9 of the Arbitration & Conciliation Act is to be partly allowed and I.A.No.III filed by the respondent is to be dismissed. Accordingly, these points are answered."
6. Heard learned counsel for the appellant and learned counsel for the respondent and perused the material on record.
7. In addition to reiterating the various contentions urged in the appeal and referring to the material on record, learned counsel for the appellant invited our attention to the interim order dated 22.12.2021 passed in A.A.No.127/2021 in order to point out that as per the
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aforesaid order, the contention of the appellant that it would deposit the agreed rent on a monthly basis only to the tune of 40% of the rent due and not the entire amount was accepted by the trial court and consequently, the impugned order passed by the trial court directing the appellant to deposit the monthly sums from December 2021 onwards in terms of the lease deed dated 10.06.2020 is contrary to the directions issued in A.A.127/2021.
8. It is also submitted having regard to the breach committed by the respondent-land lord which is the subject matter of the arbitration proceedings which are currently pending before the learned Arbitrator appointed by this Court, the question of directing the appellant to deposit any amount in excess of 40% does not arise. It is therefore submitted that the impugned order passed by the trial court deserves to be set aside.
9. Per contra, learned counsel for the respondent submits that the aforesaid order dated 22.12.2021 passed in A.A.No.127/2021 was a time bound order which was in force only till the next date of hearing i.e., 18.01.2022 and the appellant cannot take advantage of the said order, in order to contend that the appellant was not liable to deposit
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the entire arrears of the rent. It is also submitted that the permission granted by the Arbitral Tribunal in A.A.No.127/2021 on 22.12.2021 to deposit only 40% of the monthly sums was only at the instance and request of the appellant without there being any adjudication of the liability of the appellant to pay rent and since the said A.A.No.127/2021 is still pending adjudication before the trial court, the said order dated 22.12.2021 has no connection or nexus whatsoever to the liability of the appellant to pay the monthly sums and consequently, the said order dated 22.12.2021 passed in A.A.No.127/2021 cannot be relied upon by the appellant, to contend that it was liable to pay only 40% and not the admitted monthly sums in terms of the lease deed. It is therefore, submitted that the impugned order passed by the trial court is just and proper and does not warrant any interference by this Court in the present appeal.
10. By way of reply, learned counsel for the appellant submits that the interim order dated 22.12.2021 passed in A.A.No.127/2021 was time bound and restricted to the next date of hearing only insofar as restraining the respondent-landlord from interfering with the appellant's possession of the schedule property and permission issued
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to the appellant to deposit the rent as prayed for in its memo dated 21.12.2021 was not time bound and the said order directing the appellant to deposit the amount, continues to be in force and the same would enure to the benefit of the appellant.
11. A perusal of the impugned order will indicate that the trial court has taken into consideration the entire material on record including the fact that the appellant was liable to pay monthly sums to the respondent in terms of the lease deed entered into between them. The trial court has also noticed that except noting the memo filed by the appellant that it agrees to pay 40% of the monthly sums, no order has been passed in A.A.No.127/2021 restricting the liability of the appellant to pay only 40% of the monthly sums and not the agreed monthly sums in terms of the lease deed.
12. We find considerable force in the submission made by learned counsel for the respondent that the liability of the appellant to pay the admitted rent in terms of the lease deed dated 10.06.2020 has no nexus or connection whatsoever to the permission granted by the trial court in A.A.No.127/2021 permitting the appellant to
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deposit 40% of the monthly sums especially when A.A.No.127/2021 is pending adjudication and there is no determination by the trial court restricting the liability of the appellant only to 40% of the monthly sums; in other words, merely because the trial court has accepted the memo dated 21.12.2021 filed by the appellant and permitted it to pay the rent to the extent of 40% only, the said permission cannot be construed or treated as having absolved the liability of the appellant to pay the monthly sums and other amounts to the respondent in terms of the undisputed lease deed dated 10.06.2020 entered into between them.
13. It is also relevant to state that under the impugned order, the trial court has directed the appellant to pay the monthly sums from December 2021 till conclusion of arbitration proceedings or till passing of any interim order by the Arbitral Tribunal; it is therefore clear that the trial court has sufficiently safe guarded the rights and contentions of the appellant in the impugned order, which does not warrant interference on this ground also.
14. Insofar as the grievance of the appellant with regard to dismissal of I.A.No.III by the trial court under the
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impugned order is concerned, in view of the undisputed fact that the arbitration proceedings have already commenced between the parties, wherein the respondent has sought for eviction of the appellant from the schedule property, the impugned order passed by the trial court rejecting I.A.No.III does not warrant interference.
15. Under these circumstances, we are of the considered opinion that the impugned order passed by the trial Court does not suffer from any infirmity and illegality warranting interference by this Court in the present appeal.
16. At this stage, learned counsel for the appellant submits that the respondent has committed breach of the terms and conditions. She further submits that liberty may be reserved in favour of the appellant to file appropriate applications before the Arbitral Tribunal comprising of the sole Arbitrator seeking appropriate reliefs without being influenced by the observations and findings recorded in the impugned order or the present appeal. The said submission of the learned counsel for the appellant is placed on record.
17. Accordingly, we pass the following:-
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ORDER
(i) The appeal is hereby dismissed by confirming the impugned order dated 04.03.2022 passed by the trial court.
(ii) Liberty is hereby reserved in favour of the appellant to file appropriate application before the Arbitral Tribunal seeking suitable reliefs which will be considered by the Arbitral Tribunal after affording an opportunity to the respondent and without being influenced by the observations and findings recorded in the impugned order or by this order.
(iii) It is further directed that any amount deposited by the appellant pursuant to the impugned order or by this order would be without prejudice to the rights and contentions of the parties and all rival contentions are kept / left open to be decided by the Arbitral Tribunal.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE KPS